Andrew Coyne: It’s time to look again at guaranteed incomes

For much of the past two years, much of the media has been obsessed with a tiny number of very rich people — “the one per cent.” Rather less coverage has been devoted to the far greater numbers of the very poor: the bottom 10 per cent. This suggests a certain loss of perspective. Surely if there is a problem that merits our concern, it is not that we have too many rich people, but too many poor.

On the other hand, everything’s relative. Maybe there is less talk about poverty nowadays because, in Canada at least, there is less of it about. And indeed that’s true: Though it has gone all but unreported, the proportion of the population on low income has fallen sharply over the last decade. By the most common measure, Statistics Canada’s Low-Income Cutoff, it has fallen from 15.2 per cent in 1996 to nine per cent in 2010 — the lowest level in nearly four decades.

Using a more recent yardstick, the “market basket” measure — roughly $30,000, depending on the city, for a family of four — it has fallen from 12 per cent to 10 per cent. (The same progress has not been observed relative to yet a third benchmark, one-half of the median income — not surprisingly, perhaps, as median incomes rose steadily over much of that period.) Had the trend been in the other direction, you may be sure we would have been talking about nothing but.

Still, it ought to trouble us that so many remain so poor, in a country as well off as ours — not least because we devote so large a share of our resources to eradicating it: more than $160 billion annually, combining the various federal and provincial programs. Emphasis on the “various.” Indeed, there are libraries full of research to show that the sheer multiplicity of these programs — overlapping, confusing, and riddled with perverse incentives — is a big part of the problem. The safety net is for too many people a spider’s web, in which they can remain trapped for years.

Every so often this enduring problem produces a spasm of reform efforts, usually inconclusive. With federal and provincial finances in their current disarray, and given the premium, as the ranks of the retired swell, on freeing every available person-hour for work, perhaps it is time to try again. Some impetus was provided by the recent report of the Commission for the Review of Social Assistance in Ontario, the first the province has undertaken in more than 20 years. More radically, there is renewed interest in that hardy perennial, the guaranteed annual income, as championed by the indefatigable Sen. Hugh Segal.

The basic idea behind the GAI is sound: to consolidate a number of federal and provincial programs, some in cash and some in kind, into a single, universal, unconditional cash benefit, delivered through the tax system. The base amount would be modest: perhaps $10,000 to $12,000 per person. Critically, it would be taxed back only gradually, say at 25 cents on the dollar, as earned income rises. Compare that to current practice, where benefits are often withdrawn dollar-for-dollar, or in the case of benefits in kind like free dental care or prescription drugs, are denied altogether to those who leave social assistance: an effective marginal tax rate of 100 per cent or more.

You can see why the people who design and administer these systems do this. They’re trying to save money; they want to target assistance only to those who “need” it; they worry what people would do if given the cash to buy what they want, rather than the services government thinks they should have. But the result of all this careful selection and monitoring is not just condescending and intrusive: It effectively punishes people for taking a job, or working longer hours. This is the key insight of the GAI: Dependence is created not so much by giving people money when they don’t work — certainly not at $10,000 a year — as by taking it away from them when they do.

So if all of this makes sense, why hasn’t it been done? One barrier is cost. The more gradually you reduce the transfer as income rises, the more paltry the base amount must be to stay within a given limit; conversely, set a more generous minimum, and a steeper clawback becomes necessary. Of course, the arithmetic becomes less stark if you include the revenues saved from the programs the GAI would replace. But here you run into other obstacles.

Most of these programs are provincial, and the provinces are notoriously unwilling to give up turf. Moreover, it’s not clear just how many you’d even want to scrap. Some GAI models envisage replacing not only welfare, but employment insurance, daycare and pensions. But these are very different programs, designed for different purposes: EI, for instance, is properly about income replacement, not income support. It’s probable some current social assistance programs are ineffective and unnecessary; it’s not obvious all of them are.

So any reform will probably be incremental and piecemeal, rather than the kind of revolution some proponents have in mind. The good news is: We’re already part way there. The Guaranteed Income Supplement for the elderly, the National Child Benefit for parents with children, and the Working Income Tax Benefit for the working poor are all very GAI-like, as is the GST credit available to those on low income generally. Perhaps it’s simply a matter of building on those foundations.

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